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Electricity Lines Business Disclosure Requirements

Electricity Lines Businesses: Commission releases information disclosure requirements

The Commerce Commission is today issuing its first set of broad information disclosure requirements for electricity lines businesses. This work is part of the Commission’s development of a regulatory regime for lines businesses, as required by Part 4A of the Commerce Act.

The Commission’s information disclosure requirements largely replicate and replace the existing information disclosure regime provided under the Electricity (Information Disclosure) Regulations 1999, administered by the Ministry of Economic Development (MED). The Commission intends to subsequently develop these requirements over time, with a major consultative review planned later in 2004.

“The information disclosure regime shares the same overall purpose as the targeted control regime under Part 4A of the Act—to promote the efficient operation of markets directly related to electricity distribution and transmission services,” said Commission Chair Paula Rebstock.

“The information disclosure regime is intended to achieve that purpose by ensuring that lines businesses make reliable and timely information about their operation and behaviour publicly available.”

The Commission’s information disclosure requirements refer to two handbooks, both of which are also issued today. The first is an Electricity Information Disclosure Handbook, which includes the allocation methodology to be used by lines businesses in the preparation of financial statements under the requirements.

The second is an Optimised Deprival Valuation (ODV) Handbook, which includes a methodology for valuing the system fixed assets of lines businesses. As a purely interim measure, the Commission is issuing MED’s existing ODV Handbook as a Commission document.

Last year, the Commission initiated a review of MED’s ODV Handbook and, before Christmas, invited submissions on a draft of a new ODV Handbook. The Commission recently announced that it will be holding a three-day conference in mid-April on its draft new ODV Handbook, to give interested parties the opportunity to present their submissions on the draft.

The Commission’s intention is to issue its new ODV Handbook after mid-May, following completion of this ongoing consultation process. In complying with the information disclosure requirements for the financial year ending in 2004, lines businesses would use this new ODV Handbook, rather than the interim one issued today.

The Commission’s information disclosure requirements, and the associated Handbooks, can be found on the Commission’s website, www.comcom.govt.nz.

Background Part 4A of the Commerce Act 1986, which commenced on 8 August 2001, establishes a regulatory regime for large electricity lines businesses (distribution businesses and Transpower).

Under Part 4A, the Commission must, inter alia, develop an information disclosure regime requiring lines businesses to disclose information concerning their business. The Commission is required to publish a summary and analysis of the information disclosed.

On 12 September 2003, the Commission released an Issues Paper relating to the development of a handbook for the valuation of system fixed assets owned by lines businesses using the Optimised Deprival Valuation (ODV) methodology. On 16 October 2003, the Commission released a Process Paper outlining the process that the Commission intended to follow in developing and refining the information disclosure regime and the ODV Handbook. The Commission invited submissions and comments from interested parties on both papers.

On 23 December 2003, the Commission invited submissions on its draft information disclosure requirements, on its draft ODV Handbook, and on its draft Electricity Information Disclosure Handbook.

The Commission will hold a conference on the draft of its new ODV Handbook from 14-16 April 2004, to give interested parties the opportunity to present their submissions.

In light of its decision to hold an ODV Handbook Conference, the Commission issued an updated Process Paper on information disclosure on 24 March 2004. Subsequently, the Commission issued its information disclosure requirements on 31 March 2004.

A brief description of those requirements was posted in the Gazette on the same day. The purpose of the information disclosure regime, as set out in section 57T of the Commerce Act, is to promote the efficient operation of markets directly related to electricity distribution and transmission services by ensuring that lines businesses make publicly available reliable and timely information about the operation and behaviour of those businesses, so that a wide range of people are informed about such factors as profits, costs, asset values, price (including terms and conditions of supply), quality, security, and reliability of supply of those businesses.

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